Working Paper: NBER ID: w24105
Authors: Joshua Aizenman; Menzie D. Chinn; Hiro Ito
Abstract: We estimate the impact of the extensity of macroprudential policies on the correlation of the policy interest rates between the center economies (CEs, i.e., the U.S., Japan, and the Euro area), and the peripheral economies (PHs). We find a more extensive implementation of macroprudential policies would lead PHs to (re)gain monetary independence from the CEs when the CEs implement expansionary monetary policy; when PHs run current account deficit; when they hold lower levels of international reserves; when their financial markets are relatively closed; when they are experiencing an increase in net portfolio flows; and when they are experiencing credit expansion.
Keywords: macroprudential policies; monetary independence; financial spillovers
JEL Codes: F38; F4; F41; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| macroeconomic conditions (E66) | effectiveness of macroprudential policies (E61) |
| macroeconomic conditions (current account deficits, low international reserves, credit expansion, net portfolio flows) (F32) | effectiveness of macroprudential policies (E61) |
| macroprudential policies (E60) | monetary independence of peripheral economies (F36) |
| macroprudential policies (E60) | correlation of policy interest rates between ces and phs (E49) |
| expansionary monetary policy by ces (E59) | correlation of policy interest rates between ces and phs (E49) |